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Daily Observation: WTI's key trading levels

November 13, 2017

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The recent surge in oil prices is being driven mostly by geopolitical risks in the middle east and the gulf. 

 

Since early 2016 Oil prices have doubled. Momentum has been strong since this September and particularly over the past three week where we saw WTI rise from $51.80 all the way to $57.60.

 

I believe that the increase in Oil prices has been driven by increasing concerns about supply disruption due to geopolitical events which took place recently in Saudi Arabia. Notably concerns about renewed US oil sanctions against Iran following US president Donal Trump’s hardened rhetoric and the increasingly strained relations between Iran and Saudi Arabia (the two countries together account for 15% of global oil production).

 

These tensions are likely to remain and hence provide support to oil prices in the near term, which would be positive for oil-producing emerging markets such as Russia, Indonesia, Nigeria and the Middle East economies but would spell trouble for large oil-importing countries such as Turkey and South Africa. 

 

In the below chart You will find the important trading levels for WTI and below the chart you will find an analysis report on what could happen, both the upside and downside is covered.

 

WTI, Daily Chart

 

 (click on image to enlarge)

 

Price action of WTI is currently at an active resistance level, this level was a key support level in April and May 2015, it was broken in August 2015 and ever since then WTI has remained lower. This is the first time price reached this support turned resistance in over 2 years. 

 

A falling wedge or flag pattern could be in the process of creation right now (seen on the daily chart above) which indicates that WTI could head above the key resistance level price action tested late last week. 

 

The basic upside is that the pattern (flag/wedge) could push price above the level and make a retest of the resistance level ($62.10), a level that has not been reached since June 2015. 

 

The flipside of the bullish move is price heading back down to the support ($54.05), that could only happen if production increases in the US or any other major Oil producer or if the tensions die out in the middle-east. 

 

Thats all I have for you today. If you decide to trade Oil, let me know what you will be doing in the comments below!

 

Cheers and happy trading!

 

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